GameStop chaos weighing on equity market

The New Zealand share market had a slow start to February, with investors nervous about fallout from the GameStop drama.

Monday, February 1st 2021, 7:09PM

by BusinessDesk

The S&P/NZX 50 Index fell 30.04 points, or 0.2 percent, to 13,097.25. Within the index, 23 stocks fell, 20 rose and seven were unchanged. Turnover was just $90.5 million as a third of the country was off work for Auckland Anniversary Day.

Key indices in the United States fell about 2 percent on Friday night as the fallout from the GameStop short squeeze continued to unsettle investors who were already wary of record high prices.

BNZ market strategist Jason Wong said investors may be nervous that the wild trading could trigger a systemic event or further selling and reducing their equity exposure.

NZ’s index fell as low as 1 percent this morning but rallied during the afternoon after the Australian market opened and US futures trended upwards.

Peter McIntyre, an investment adviser at Craigs Investment Partners, said investors were being more cautious and holding more cash in their portfolios as an insurance buffer.

“There is enough swirling round the pot to keep everyone on their toes, but in saying that interest rates are low, and the bond market is trying to price in some inflation,” he said.

Fisher & Paykel Healthcare led the market lower as it fell 3.3 percent to $33.51, albeit on a light volume of just 325,000 shares.

Pacific Edge slipped 2.8 percent to $1.05 and Sky Network Television fell 2.4 percent to 16 cents, both on small volumes.

Pushpay Holdings had the day’s biggest gain, up 4.2 percent at $1.72, followed by Contact Energy which climbed 3.4 percent to $8.45.

While people were fixated on GameStop, the story moving the index last week was the correction in renewable electricity prices. Contact and Meridian Energy both fell more than 11 percent last week, as their prices deflated from an index fund-driven surge earlier in the month.

Meridian Energy recovered 0.4 percent to $7.18 today. Both electricity generators may have received a boost from the Climate Change Commission’s draft carbon budget which called for further electrification of industrial processes.

Cinema software company Vista Group International has jumped almost 7 percent since last Thursday, as it appears to be benefitting from the GameStop traders buying shares in the world’s largest cinema chain.

AMC Entertainment Holdings has also benefited from the Reddit speculation frenzy and is considering taking advantage of the flash rally to raise more capital.

Vista shares rose 3.4 percent to $1.85, today. McIntyre said: “If that sector rises it typically filters throughout the world, it’s a bit like water,” said McIntyre. “It’s a vaccine recovery story as well.”

The yield on NZ government bond and swap rates crept higher, now at 1.155 percent and 1.1850 percent, as the Reserve Bank announced it would purchase just $570 million of government bonds, down from $650 million last week.

The kiwi dollar was trading 71.99 US cents at 5pm in Wellington, up from 71.56 cents yesterday.

The trade-weighted index was at 74.73 at 5pm, from 71.56 on Friday. The kiwi traded at 94.07 Australian cents from 93.58 cents, 75.36 yen from 74.75 yen, 59.33 euro cents from 59.15 cents, 52.40 British pence from 52.22 pence, and 4.6508 Chinese yuan from 4.6222 yuan.

Tags: Market Close